There is two Frances:that of a honest man like Hollande,and the ridicolus and pretentous sarkozist "France Forte",so strong that lost the electoral struggle with Hollande and failed the Lybic attempeted holdup.Hollande inherited the setbacks of the gangster who preceded him,and should be encouraged.He deals with a country that has many problems,as any other human society in the real world,and that his predecessor denied by falsifying statistics and data of any kind.An hard legacy,indeed

Wow, France is doing better than the US and the UK by many measures (debt as a percentage of GDP is lower in France than in the UK and far lower than in the US, labor costs more in UK than in France etc). And to think you also get the best healthcare in the WORLD, free college, labor protection, and a public pension in France - all of that is distant, distant dream in the US, where it is very possible to go bankrupt just by getting sick or sending your kids to college. France is doing something right! I lived for 10 years in France and now live in the US. I can tell you that the capitalist corporatocracy of the US is no paradise.

I do not worry at all about France.
France is the most powerful super-power in Europe.
France has the most intelligent people , superior to the rest of of the whole world because they re French.
France is the most powerful economic and military super-power.
Anything else outside of France is basically inferior and less worth than crap.
French products are the best human mankind ever could buy.
Therefore I think France is facing an immense increase of its military and economic power.
France is the most important factor on this planet.
Little countries like China,India and the USA are nothing but trembling if the French tell the rest of the world their superior ideas.
So it is a shame that the British are not willing to accept this special kind of French superiority.
France is the only asset in Europe and the rest is nothing but inferior crap without France.
Italy, Spain, Greece and Portugal are adoring the French leadership as never before and go down on their knees.
Germany will fall on its knees as son as they understand the natural superiority of France:)
The day will come where Mrs.Merkel will go down on her knees together with David Cameron at the Elyssée.
France with its banlieues and its arab immigrants is nothing but the very best example of real good integration although they are burning at 31.December as a local custom some thousands cars in a
festivity of real relaxed joy each year:)
Vive la France - Vive the French fonctionnaires:)

The Special Report on France was Excellent - and also quite amusing.The Economist (now a "Norman Thomas Progressive" newspaper?) details policies in France which would seem to indicate that France is headed down the "Greek Road". Yet theses policies mirror those of Economist-endorsed Barack Obama! Perhaps someone could explain the paradox - or has The Economist simply decided to "go Socialist"?
Michael Shea

"Start with the negative. Public spending accounts for almost 57% of national output, the public debt stands at over 90% of GDP (and rising) and the country seems to be running a near-permanent budget deficit."

public spending doen=sn't mean that it's all negative, it's also part of the GDP. The debt so far isn't growing, it even lowered by 7 billions euros since 2011. The budget deficit is the result of the rigid DM/euro, and the fact that while Germany exports surpluses to EZ, she doesn't import much from EZ but from China, and from the eastern republics.

"It is no surprise that in January France lost its AAA grade from Standard & Poor’s, a rating agency."

No it's not a surprise that there's a dominos effect in the eurozone, but Germany isn't imune too from the same dominos effect:

"Wealth, profits and high incomes are heavily taxed, the rich are routinely abused and people are instinctively hostile to capitalism. Everything from the labour market to pharmacies to taxis is heavily regulated: no wonder would-be entrepreneurs feel discouraged"

BS, the french entrepreneurship equals the german's the americans, the brits...

"No entirely new company has entered the CAC-40 stockmarket index since it started in 1987; redundancies can lead to endless court proceedings; and trade unions and protesters tend to take to the streets at the first hint of reform. It adds up to a deeply anti-business culture."

did you verify? the french workers strike less than some of their european peers

"Yet growth has stalled and the economy is on the brink of recession for the second time in five years"

yet still above Britain, and last month above Germany

"Several big companies are planning to follow Peugeot’s example by closing factories. Unemployment has recently risen above 3m, a rate of over 10%."

closing? delocating or firing out some employees, but it's the same everywhere, even in Germany

"Such riches can easily lead to an unattractive arrogance, but they explain much of the country’s enduring appeal. They are also among the reasons why France and the French are so resistant to change: why would you want to take the reformer’s knife to a country that represents the peak of civilisation?"

BS, mere imaginative deduction, any jaelousy?

"Certainly France has been more reluctant and slower than any other country in Europe to reform its labour-market, pension, social-security and welfare systems"

because there wasn't any urgency, in the meanwhile some administrations aren't hiring definive employees since a decade.

"Now its labour costs are far above Germany’s and it has a large and rising current-account deficit"

and why? Because Germany forced a deflation on her workers' wages, reverted 10% of the enterprises charges onto the workers, used massively part-time jobs at low costs (€4 per hour)

I fear there will follow quite a few more downgradings of France in the next time.
But this will be not the fault of the TE, you are accusing as anti-French.
I remember that the TE quite often was writing critical contributions about Germany and actually the French press is also not very friendly to Germany.
Perhaps Germans are better used since a very long time never to expect any positive remark from abroad and perhaps the French now are reacting oversensitive.
The TE is nothing but describing some facts everybody can see from outside of France.
If the French want to change or not is absolutely only up to them.

And the old clichés come from you the French side and not from outside.
The French press and public actually is full of anti-German clichés as if we were in 1914 again.

I don't mind what the French will do as long as Germany does not have to pay he bill for them.
If they reduce on a 20-hours week with double salaries and pension with 28 just let them go for it.

And I remember how enthusiastic just you were when Sarkozy was planning a mixed Anglo-French navy. I thought the British since ever have been your real friends and not the Germans.

I liked your "fact-checking" effort in your counterargument. Regarding the direct-foreign investment, the boursorama website ranks France 2nd...but in Europe...Maybe TE was referring to a world ranking?

"There are free-market successes but also too many instances of excessive state control; economic triumphs but also failures; northern puritanism but also a certain southern laxity. These contrasts make it easy to present the country in both a negative and a positive light."

who are you to tell us that there are too many instances of excessive state control?

doesn't appear that in your so called lesser state country, you're doing better !

oh, and northern puritanism vs southern laxism is mere racism, or complete ignorance, there's not such difference in morals as far as economics, certainly not in our ages of globalisation, this is a mere cliché dating from the 18th century

Poor things! Read cahier numéro 13 de l'OCDE- OECD - and you will find out that everything was planned in advance for us. Who cares? And who wrote all this literature in OECD cahiers?J Guess who? You should all read every article referring to the crisis in Britain from The Independent, when Cameron decided to implement austerity plans. I was surprised to see how Journalists took up their pens to change their views on certain issues. I was flabbergasted at reading that they assumed for the first time that they would take this responsibility on their shoulders. What about TE?

Capitalism does not just benefit the capitalist alone - it mainly benefits the customer. If the capitalist does not serve the customer the capitalist will have, to paraphrase John Cleese, a late business. As a result, Capitalism (perhaps better called Customerism?) is truly “Power to the People”. Ask yourself which of the products and services you use were invented, developed and produced by the private sector and which by the public sector?

Socialism, or whatever “planned economy” on the other hand, is Power to the State - and the State is always and everywhere all about power. While Capitalism gone awry may produce a Madoff or a Goldman Sachs, the excesses of government are Stalin, Hitler, Mao, Pol Pot et al.

In general the only real purpose of any bureaucracy is to grow. It’s immaterial whether the bureaucracy is in the private or public sector - its only purpose is to grow. Fortunately, the private sector has a pruning mechanism. Unfortunately, the public sector doesn't. Every page, every sentence, every word of legislation and regulation is fertilizer that enables bureaucrats to grow the bureaucracy and the power of the state Similarly, so does increasing the population of those dependent on the state. As history shows when people cede power to the state they do not easily get it back.

While the Capitalist is rewarded for efficiently satisfying customers, Public sector bureaucrats are punished for efficiency and problem solving - they lose funding and therefore status and power. They are rewarded by amassing and centralizing power. How does one incentivize government bureaucrats to not accumulate of power?

From Chinese economist Zhang Weiying:

"We human beings always seek happiness," says Mr. Zhang. "Now there are two ways. You make yourself happy by making other people unhappy—I call that the logic of robbery. The other way, you make yourself happy by making other people happy—that's the logic of the market. Which way do you prefer?"

This statement, often wrongly interpreted as 'wage dumping' on these blogs, is given to misunderstanding. Absolute labor costs in the sense of 'hourly compensation costs' are higher in Germany than in France . . . and always have been.

What The Economist meant to say is that that France's unit labor costs are "far above" Germany's.

But: unit labor costs reflect 'productivity' and not 'labor costs per working hour'. If productivity per working hour rises than unit labor costs decreases, independently from the fact that "labor costs per working hour" (hourly compensation costs) might have increased.

Thus, when hourly compensation costs rise by 10% while productivity rises by 12%, then "unit labor cost" still will drop. Ideally "unit labor costs" and "compensation costs per working hour" walk hand in hand. If unit labor costs begin to rise steeply, then this is usually a sign of grave loss of competitiveness compared to previous years.

As OECD chart provided by The Economist, "Unit labor costs 1999 to 2011" shows, in Germany, productivity gain and hourly compensation costs in manufacturing went almost ideally hand in hand between 1997 and 2010. A 'slump' in unit labor costs between 2004 and 2008 is visible on curve for Germany, due to Chancellor Schroeder's 'Agenda 2010', but this was compensated for from 2008 on, when compensation costs per working began to rise faster than productivity. As the chart shows, in 2011, the 'unit labor costs' in Germany were above the 1999 level.

This means that the manufacturing workforce in Germany participated late but fully in the country's gain of productivity. Hence, Germany's unit labor costs are almost ideally balanced from 1999 to 2011, while all other displayed countries (including the EU as a whole) recorded a steep rise in their 'unit labor costs'; in other words: they have lost competitiveness towards the rest of the world compared with 1999.

As a comparison study of the US Bureau of Labor Statistics shows, in 1997, the average hourly compensation costs in Germany were $29.19. The hourly compensation costs (labor costs per working hour) had risen in Germany to $43.76 in 2010. While the percentage of labor costs of the total production costs, compared to the USA, stayed almost 'level' in Germany, at 126% of the USA with 100%.

In France, the hourly compensation costs were $24.88 in 1997 and $40.55 in 2010, or roughly 8 percent lower than in Germany. What the Economist's chart "unit labor costs 1999 to 2011" reflects is, hence, not a steep rise in hourly compensation costs in France, but a steep drop in productivity per hour worked.

Please don't come up with such facts which disturb our French friends while they are finetuning their prejudices and conspiracy theories with regard to Germany.

BTW, yesterday in a German (yesyes) magazine there was an example for the cosy French socialism: if your spouse takes on a job somewhere else in France and you quit your job as well to move house, say, from Normandy to Cote ´d Azur. There you don't get a job immediatly. Know what? You get public unemployment benefit for quite some time. No, this is unfortunately no joke.

According to a lot of (French and other GIPSIF) commenteers this is of course only due to the fact that the Germans stubbornly refused to make their economy incompetitive, so it is only Germany who is to blame.

For instance for not reducing the pension age to 60 as the French did - they instead increase it over time to 67. Or for not reducing the work time per week to 35hrs - for most of the Germans, it is 40hrs.

This 'unfriendly acts' are funnily enough even interpreted as 'milking' of the GIPSIFs which, instead of getting their houses in order, installed huge public sectors, enjoyed big wage increases, build bubbles in banking and building...

Couldn't agree more! The Germans did it! They work too hard, too efficient, deliver too much quality, thus setting a standard the PFIIGS cannot reach.
For these reasons, I completely "understand" that Germany needs to pay for Southern profilgacy: through endless guarantees, EFSF's, banking unions and EU budget. Milk the Germanss, they'll work harder and harder and pay anyway. Germans will go on pension on their 80's so that Italians can retire in their 50's.
What I do not understand is this: why on earth do Germans agree??? Can someone explain this??

"For instance for not reducing the pension age to 60 as the French did - they instead increase it over time to 67. Or for not reducing the work time per week to 35hrs - for most of the Germans, it is 40hrs."

mere lie, the French retire at 61/62 after 41/42 years of works, while the Germans retire at 62 after 35/37 years of work

Here I say one thing: I live in Versailles, where the hall of mirrors is, but I won't accept as truth even if you say Chinese tourists accounts for a 5 percentage. If you count all the Asian looking faces, like Japanese, Koreans, Malaysians, Singaporeans, Indonesians, Taiwanese, etc, as Chinese, then that number can be higher than 5% for sure. Otherwise, I know my town!

I saved in my dairy sometime in March or April 2012 (as there would be a special Report on France in November 2012. And I purchased the issue when my calendar dutifully informed me yesterday.) I'm not sure if I agree with The Economist any more!

Combined with the nonsense about Versailles being full of mainly Chinese tourists - France remains the world's most popular tourist destination - and the distortion of the IMF report, which did not suggest anything so ridiculous as that France risked being overtaken by Spain, whose productivity per hour worked, unit labour costs and gdp per capita are nowhere near as favourable as France's and have no prospect of being so, one is left to conclude that the Economist is distorting the issues in support of an otherwise admirable anti-statist agenda.

THE BINDING CONSTRAINT IN FRANCE
is the civil servant status which gives a permanent jobs to a great number of people. Not only government employees enjoy this status, but also people who are providing private goods such as: EdF, SNCF, metro.

These civil servants with a status are against all structural reforms proposed by any government (no change in labour law, no flexibility, more public employees, no reduction of the minimum wage (the highest in the world), no increase in competition, and of course no reduction in public expenditure (the highest in the world) (every problem can only be solved by more public expenditure “il faut des moyens”). If the Government wants to introduce a structural reform, it will face a general strike from public employees (only) who can put on a standstill the economy (transportation). This is why left and right governments are reluctant to introduce any flexibility measures. Why Hollande is trying to reduce the deficit by increasing only taxes and “les charges sociales” (a stupid tax on labour to finance the French social model), because he does not want to reduce the perimeter and privilege of its clientele. The new increase in VAT to reduce the “charges sociales” is welcomed, but there is no specific measures taken to reduce public expenditure. Another point not mentioned by the excellent Economist’s articles is that there are NO reduction in public expenditure in 2012, but an increase by €1 bn. (officially a decrease by €10 bn.)

A country not able to accept painful changes is a declining country, this is not the Economist’s fault, this is ours, lack of lucidity. As a matter of fact, the true patriot (he is not alone, other French people less known are saying the same thing) is the Economist, it tries to wake up the French people who are not able to think outside the hexagone box, the box is beautiful and elegant, but shrinking.

Hi jpd007, long time no hear. For some (unknown) reason I didn't even receive my copy of TE for this report. Maybe that goes to show that there is "serious" solidarity in France. Having received it from my mother in the UK under neutral envelope, and read it, my only comment is this. Why don't the French do the simple maths of Europe? At 65 million, what the hell do they think they can do against 1.3 billion Chinese, who according to TE, prefer capitalism? - That comment goes as well for the Brits and any other European country which thinks that it can "go it alone". Maybe it's just so blindingly stupid, that they just can't see it ???

It is very easy to foster this France's bashing. Indeed, Germany and France are at par with a third quarter GDP increase of 0.2%. While the french should not over-interpret this performance because short-term prospects are bleak, the GDP is to increase by 0.1% this year better than the United Kingdom (-0.3%). Similarly, changes in productivity over the past quarters does not really advance the British model with a decline of -0.7% yoy in the first half against 0.2% for France. In terms of public finances projections give a clear advantage France, with a deficit expected to reach 3.5% of GDP and a debt public around 92% of GDP in 2013 (90% in the article), against 7% and nearly 95% (considering British treasury exceptional coupons payment received from BoE under APF) to UK. Finally, with regard to reforms and policies implemented, France seems to finally implement a policies to provide support and improve business conditions and initiate recovery of investment. Moreover, France has significant leeway, unlike the United Kingdom, which has almost used all his cartridges in terms of deregulation or dumping tax ... with no tangible effect on productive investment. You should put more focus on the UK. The bomb should rather be there also! Tic tac tic tac

Plenty of past articles in TE have focused on British economic woes, HOWEVER, that does not alter Frances situation or make it any better. If the measure of a countries success is going to be the worse (possibly temporary) performance of a neighbour, then heaven help that country.

Over the last 10 years I have been - and still is - a reader of The Economist; this Nov 17th issue is just as intelligent, provocative and full of tact vis a vis the French regime, as the forecast expressed last April during the presidential campaign.
The reason why the French Government is presently criticizing The Econmist is caused by its anxiety about the rating agencies and the resulting money rates based on risks.
As a French entrepreneur, having managed businesses in the United States, I know that benchmarking is the response to competitiveness, and the French institutions will learn, smoothly or roughly, lessons from Europe and America...

'the rich are routinely abused and people are instinctively hostile to capitalism'
What kind of simpleminded wrote this article!!! The capitalism and the savage market is what broth us the crisis in the first place and now we are supposed to be nice with this ''rich''!!! LOL
There is no polemic about France, they are the first ones to take the control of their economy and well done.

You are right. North Korea is much better than South Korea. East Germany was a better place to live than the savage market of capitalist West Germany. Capitalism must go, so we can all enjoy workers' paradises.

oh, you know so well how to kill an argument. I suggest you to read on of the recent articles of Krugman and check other faith beliefs of our capitalistic system. I am not saying capitalism is bad, I am saying it has some serious problems and need to be fixed. Looks like the only think people care about is rich people and to take care of them because they will create ''jobs''. And besides these unhappy rich people are being abused... oh what about the rest of 98% of the France population?
Even better than that, the global income per capita is 7.000$ if everyone would have a decent way of life sharing these commodities we trade so barbaric, how would you life with that. But don't worry cause to see all this is taking a little of ''thinking'' enjoy living in the 60's.

your viewpoint only confirms the author's point - that there is a growing hostility to capitalism and the wealthy in France, which in the context of disastrous twentieth century economic and social experiments (in China, North Korea, the USSR) which in fact caused more suffering than their capitalist counterparts, may be viewed by some as a worrying trend. look at the issue reasonably, yes capitalism needs to be reformed, the whole system needs to be reformed, but total abolition of the capitalist model has a disturbing history.

Uhm, I have lived in Vietnam for a number of years, and I can guarantee that the best thing to have happened for the good of the people was the doi moi in the late 1980s, the economic reform. Before that, my wife had to help her parents work from age 5, meat was a treat, medicine was mostly traditional, holidays were rare and spent at home, and so on. Although some of this still holds true, the majority of people have seen a great increase in living conditions. Latin culture is very romantic and would love to believe in this 'workers paradise', but there is empirical evidence to prove that communism definitely doesn't deliver it.